Sapporo shares rise on hopes for white-knight bid

By Sachi Izumi

TOKYO (Reuters) - Sapporo Holdings (2501.T: Quote, Profile, Research) shares rose more than 2 percent on Monday to their highest level in 9-½ years as investors bet on white-knight bids for Japan's third-biggest beer maker to counter a $1.3 billion takeover attempt from a U.S. hedge fund.

The stock climbed 2.4 percent to 912 yen by the market's close, 10.5 percent above Steel Partners' offer price of 825 yen, after media reported over the weekend that bigger rivals Asahi Breweries (2502.T: Quote, Profile, Research) or Kirin Brewery (2503.T: Quote, Profile, Research) may seek tie-ups with Sapporo to boost their presence in the sluggish beer market.

"It's a tough call," said Tomomi Yamashita, senior fund manager at Shinkin Asset Management, about the prospect of a white knight stepping in on Sapporo's behalf. "But Steel Partners is probably counting on that."

At this stage, financial institutions are the main players pushing for the deal between Sapporo and one of its rivals. Asahi and Kirin remain cautious and have said their growth focus is on non-core operations such as food and health.

If Asahi or Kirin, Japan's top two beer makers, were to buy Sapporo, antitrust issues could stand in the way because the deal would give either of them a domestic market share of more than 50 percent.

Because of this, analysts say fourth-ranked Suntory Ltd., other food and beverage companies or even real estate developers could emerge as white knights instead of Asahi or Kirin.

"Asahi or Kirin could buy Sapporo, but it seems more likely that it would be a company that doesn't have a beer business... there is also the possibility of a foreign company," Shinkin's Yamashita said.

Sapporo shares have jumped 29 percent since the beginning of this month, and the Nikkei business daily said on Monday the high price was deterring rival beer makers from making bids. The stock's current price is 104 times the company's 2007 forecast earnings, compared with Asahi's 20.5 and Kirin's 33.